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UK Markets Week 04 Feb 2013

Anglo American said it will report a FY12 underlying loss of $225M in respect of Anglo American Platinum Ltd vs a net income contribution of $410M in the previous year.

Randgold Resources posted 4Q and FY results: "Profit for the quarter increased by 18% on the previous quarter at $143.6M and was in line with the corresponding quarter of 2011. (...) Profit for the year ended 31 December 2012 of $510.8M represented an increase of 16% and basic earnings per share were up 12% to $4.70 (2011: $4.20), (...) The board has proposed to increase the annual dividend by 25% to 50 US cents per share."

Bumi Plc Senior Independent Non-executive Director Julian Horn-Smith called on Nat Rothschild to return the bonus shares that he was granted in the Co as a reward following the transaction which created the Co.

Barclays announced Finance Director Chris Lucas and General Counsel Mark Harding will retire. Last Friday the stock (-0.33% to 300p) closed at a 3-month relative low against the FTSE 100.

Royal Bank of Scotland Group may pay £500M-600M in settlement with US and UK authorities over alleged LIBOR manipulation, reported the FT citing sources familiar with the situation.

Auto & Parts basic resources and technology shares gained most in London on Friday.

Basic Resources: Lonmin (+5.58% to 380.1p) and Mondi Plc (+3.55% to 773.5p) closed at a 3-month relative high against the FTSE 100.

Financial Services: Schroders (+1.86% to 1971p) closed at a 3-month relative high against the FTSE 100.

Industrial Goods & Services: Spectris (+4.52% to 2314p) reached a new 3-month relative high against the FTSE 100.

Media: Reed Elsevier (+3.86% to 713.5p) and WPP Group (+1.87% to 1010p) closed at a 3-month relative high against the FTSE 100.

Retail: Inchcape (+2.6% to 485.6p) closed at a 3-month relative high against the FTSE 100.

Technology: Imagination Technologies (+4.41% to 533p) reached a new 3-month relative high against the FTSE 100.

Telecommunications: BT Group (+6.52% to 264.8p) and Inmarsat (+1.94% to 657.5p) reached a new 3-month relative high against the FTSE 100.

Travel & Leisure: Greene King (+4.12% to 695p), Easyjet (+3.33% to 962p), Ladbrokes (+2.22% to 216.7p) and William Hill (+1.85% to 391.2p) closed at a 3-month relative high against the FTSE 100.

Capital Spreads Daily Market Commentary 04 Feb 2013

It's Bash a Banker Day

Gorgeous George is to bash the banks today as he sets out his plans to ring fence their operations. Not for the first time we will see a politician making a populist speech to show that the nasty old Tories are being tough on the banks to make them safer and ensure that we don’t see a repeat of the banking crisis of 2008 and that ultimately that UK tax payers will not have to bailout banks in order to prevent money from being distributed from cash points all over the country. We’re most likely to see an attempt to try and curry some favour with the electorate more than anything else as bashing a banker remains a very popular pastime, particularly as scandal after scandal continues to hit the industry.

There’s no question that banks became too big during the boom years, RBS in particular and even in years since the banking bubble burst the industry is going through seismic changes. Completely splitting up the banks however isn’t going to help the industry or the economy in the long run either, regardless of whether it might be a popular move or not. What we need now is the banking industry to support the economy by lending to businesses and consumers and stringent ring fencing or splitting of the “casino” bank and the retail bank is likely to curtail this. Despite the government’s best efforts to apply the pressure on banks to lend more, regulation is hampering their efforts as banks have to hold more regulatory capital, so on one hand you have the funding for lending scheme and on the other you have the government looking to separate the banks which would be counter productive to their goal of increasing the flow of credit.

Banking stocks haven’t been affected too much this morning ahead of the Chancellor’s speech but the FTSE 100 has got off to a negative start for the week. On Friday the big US nonfarm payrolls data for January came in slightly lower than expectations at 157k but what caught investors’ attention were the upside revisions for the previous two months. In addition, other bits of economic data were a pleasant surprise with manufacturing also surpassing expectations. As a result, the Dow Jones closed above the 14,000 mark, the first time since 2007 marking in a 150 point gain.

As mentioned though this has translated into strength for Europe this morning with the FTSE trading a little lower to 6330 at the time of writing. To the upside bulls will be closely watching the resistance and year’s highs around 6350.

The risk appetite was boosted on Friday by a stronger US job sector and reassurance from the Federal Reserve that it will continue to pump money into its economy. Benefiting from the news was the common currency which went on to reach above the 1.3700 level. Towards the close the euro pulled back slightly but nevertheless closed 77 pips up at 1.3654. A bullish feature (for the euro) worth considering is the decline in the ECB’s balance sheet which added to the general optimism regarding the common area.

Gold closed at $1667.3 on Friday and is expected to trade in a narrow range of between $1660-1680 by many as its shine has been taken off by upbeat economic data in the US. This morning it is edging up slightly. The world's largest economy has gained traction and other good news of signs of recovery across key economies has meant that the case for monetary stimulus measures weakens and the demand for the precious metal as a hedge against inflation falls. Gold's safe haven appeal has taken a knock due to this new optimism.

After China it was the US confirming that its economic recovery is on course as the employment report pleased investors. So with the two biggest oil consumers staying strong, crude prices were well supported with the WTI gaining 24 cents to $97.62 a barrel on Friday. Adding the unrest in the Middle East and North Africa its outlook remains positive.

City Index - UK Morning Brief 05 Feb 2013

UK retail sales values grew 1.9% YoY like-for-like in January (January 2012: +0.3%) and were up 3.0% YoY on a total basis (January 2012: +2.1%), reported the British Retail Consortium.

BP posted 4Q results: "Underlying replacement cost profit, adjusted for non-operating items and fair value accounting effects, was $4.0B for 4Q, compared to $5.0B for the same period in 2011. For the full year, underlying replacement cost profit was $17.6B compared to $21.7B in 2011. (...) BP announced a quarterly dividend of 9 cents a share (...) In BP's upstream, underlying production of oil and gas, excluding TNK-BP, in 2012 was broadly flat with 2011, in line with guidance. (...) BP's downstream delivered a record level of earnings for the year, and a fourth consecutive year of underlying profit growth. (...) Reported production in 2013 is expected to be lower than in 2012, with an impact from divestments of around 150,000boe/d."

BG Group reported 4Q earnings down 29% YoY to $1.0B and FY12 earnings up 3% to $4.4B, saying: "Earnings in the quarter were 29% lower, as the tax charge in 4Q2011 included a $277M credit resulting from one-off adjustments in respect of tax positions in a number of jurisdictions. (...) the Board has recommended a final dividend of 14.26 cents per share, bringing the full year dividend to 26.14 cents per share, an increase of 10% compared with last year." The Co's CEO commented: "I believe that 630 000 to 660 000 barrels of oil equivalent per day (boed) is an appropriate range for our 2013 production outlook, given the risks and opportunities we face. Given this starting point in 2013, and adjusting for the CNOOC deal, the Group's previous guidance of more than 1M boed will not be reached in 2015."

Barclays announced: "Following the outcome of its pilot review of IRHP (Interest Rate Hedging Products) sold to small and medium-sized enterprises, and the Financial Services Authority's report on this review and those conducted by a number of other banks, Barclays has increased its provision for IRHP redress by £400M at Q4 2012. This brings the cumulative provision to £850M, of which £36M had been utilised as at 31 December 2012. (...) Barclays has determined that it is appropriate to provide a further £600M for PPI (Payment Protection Insurance) redress, principally as a result of a higher than anticipated response rate to pro-active mailings in Q4. This brings the cumulative provision to £2.6B, of which £1.6B had been utilised as at 31 December 2012."

ARM Holdings unveiled 4Q normalised EPS up 10% YoY to 4.08p and normalised profit before tax up 16% to £80M on revnue of £164M, up 19%. FY normalised profit before tax was up 20% to £277M. The Co said: "ARM enters 2013 with a robust opportunity pipeline for licensing and a record order backlog. (...) The ongoing influence on consumer and enterprise spending inevitably impacts semiconductor revenues and industry confidence. However, assuming the macroeconomic situation does not deteriorate significantly, we expect group dollar revenues for the full-year to be at least in line with current market expectations."

St. Modwen Properties: FY results expected.

Victrex: Interim management statement.

London Stock Exchange Group: Singapore Exchange Ltd may join the Co in buying a 60% stake in transatlantic clearing house LCH.Clearnet or acquire a separate stake, reported the FT citing sources familiar with the matter.

Ryanair has submitted a new package of concessions to EU regulators aiming to secure approval for its proposed buying of Irish airline Aer Lingus, including profit guarantees and cash up-front for Flybe Group and transferring all Aer Lingus' London Gatwick-to-Ireland routes to British Airways, reported Dow Jones citing sources familiar with the matter.

Google Trend UK - popular searches: Nanoco Group PLC

Construction & Materials insurance and banks shares fell most in London on Monday.

Basic Resources: Antofagasta (-2.76% to 1127p) reached a new 3-month relative low against the FTSE 100.

Chemicals: Johnson Matthey (-3.57% to 2243p) closed at a 3-month relative low against the FTSE 100.

Financial Services: Ashmore Group (-1.82% to 351.2p) closed at a 3-month relative low against the FTSE 100.

Capital Spreads Daily Market Commentary 05 Feb 2013

Stocks Already on the Rebound Following Yesterday's Declines

The reemergence of eurozone worries sent shivers down investors’ spines yesterday as the sellers cascaded into equity markets driving them lower following a spike in borrowing costs for the likes of Spain and Italy. There are no prizes for guessing what the markets think of the political uncertainty in the two countries as a change at the top in Spain could mean a drastic turnaround in the efforts to sort out their fiscal problems and for Italy a return of the charismatic Silvio Berlusconi, with promises of tax hand outs left right and centre, does little to inspire confidence in the country being able to address its own considerable debts.

As is often the case with big falls in equity markets there’s a fear that trying to catch a falling knife is a fool’s game and it’s best to stand on the sidelines waiting to see if there’s another big lurch lower in the coming days that might present a better entry or re-entry level. So far this morning the FTSE is behaving as if that entry level is here as it bounces on the open and stronger than our initial opening calls. Perhaps investors feel that the sell off was so sharp in what has up until now been a strong uptrend so far this year, that it was unwarranted and that it’s time to fill their boots again.

All markets were affected by the increase in political uncertainty yesterday that has always been lurking in the background anyway but Spain, with the calls for the resignation of Prime Minister Mariano Rajoy over alleged illegal payments, was never expected to be one of the contributors to such uncertainty. As a result the focus shifted back onto Europe and the threat it represents to the global economic recovery. Considering also the gains seen so far for the US equities, investors considered it’s safe to book some of the profits and as such they pushed the Dow 130 points lower to 13,880 yesterday.

There was little data out yesterday and today things become a bit busier with the UK services PMI due at 9.30 London time. This is an important survey due to the services sector making up the lion’s share of UK GDP and the last reading saw a big and unexpected drop below 50 suggesting contraction. This morning could see it get back towards that 50 level if not back into expansion territory but that’s unlikely considering the tough weather conditions that we’ve had in the last month.

As mentioned the FTSE 100 is on the rebound this morning and at the time of writing it’s at 6270. Interestingly we would usually expect to see clients dipping their toes back in and buying the index following such a sharp decline, but we’ve not seen that this time round with the balance still being tipped towards the bears.

Of course the political risk in Spain where the Prime Minister stands accused of illegal cash payments but also in Italy ahead of fast approaching general elections, showed how thin the recent optimistic mood is. Investors did not think twice but rushed into the dollar pushing the euro 139 pips down to 1.3512. But this morning the buyers are back and pushing EUR/USD to 1.3510 at the time of writing. Later in the week the European Central Bank will announce its benchmark interest rate followed by the usual Press Conference.

Investors are still waiting for the catalyst that will cause gold to break out of the $1660-1680 range that it's been trapped in since last week. The precious metal closed $6.7 bucks up at $1674 yesterday. Momentum is seemingly running out after a twelve year rally and people are eager to look at any new figures emerging from the US that will give a further indication of the health of the world's largest economy and more importantly whether quantitative easing will continue. Loose monetary policy was a key driver in gold's rally over the past few years and many are concerned that an improving US economy will discourage the Fed from continuing with its current bond buying plans.

Crude prices followed equities lower yesterday, losing $1.58 to $96.08 a barrel with extra downside pressure coming from a rebounding US dollar. It was the uncertainty regarding the European political arena that made headlines, reminding everyone the sovereign risk from this side of the Atlantic is still present.

City Index - UK Morning Brief 06 Feb 2013

Royal Bank of Scotland Group confirmed that it is in late-stage settlement discussions with UK and US authorities over LIBOR operations, saying: "Although the settlements remain to be agreed, RBS expects they will include the payment of significant penalties as well as certain other sanctions."

Hargreaves Lansdown posted 1H results: "- Continued growth with record revenue (up 24% to £140.3M) and record profit before tax (up 30% to £93.7M). - Total net business inflows for the 6 months of £1.65B, up 42% (H1 2012: £1.16B). - Total assets under administration of £30.4B (up 30% on 31 December 2011 and 16% on 30 June 2012). - Total interim dividend up 24% to 6.3p per share (H1 2012: 5.1p)."

SSE Plc said it has agreed to sell four wind farms, with a total generation capacity of 79.5MW, to a new fund managed by Greencoat Capital for £140M in cash, adding: "SSE will invest up to £43M of the consideration into shares in the new fund."

Eurasian Natural Resources Corp published a production report: "Chrome ore extraction in Q4 2012 amounted to 1,184 kt, an increase of 17.0% on Q4 2011 (...) In Q4 2012, the Ferroalloys Division produced 392 kt of saleable ferroalloys, an increase of 8.9% on Q4 2011 (...) the Iron Ore Division extracted 10,986 kt of iron ore, an increase of 4.4% on Q4 2011 (10,522 kt) (...) bauxite extraction was 17.5% lower than in Q4 2011 (...) Copper ore extraction in Q4 was 7.4% lower than in Q4 2011."

Pier Luigi Foschi, Chairman of Costa Crociere, sold 17,580 shares of Carnival Plc at 25.76 pounds per share, while David Dingle, CEO of Carnival UK, disposed of 18,785 shares of the Co at the same price.

Deanna Oppenheimer, a director at Tesco Plc, acquired 17,500 American Depository Receipts of the Co at 16.96 dollars per ADR.

Capital Spreads Daily Market Commentary 06 Feb 2013

RBS Reveals Fine, But No Heads Roll

RBS is in focus today after announcing its Libor settlement with UK and US regulators which currently stand at a not insignificant £390 million. This is towards the low end of expectations so initial response from the market is positive as the shares are up on the open and it makes little sense to impose a hefty fine on a company that is 80% owned by the British taxpayer as in effect the regulators would be picking their own pockets. This slap on the wrist marks the end of yet another scandal for the bank, although of course it’s not the only one to receive such a fine, but what is interesting is that there are few calls for the resignation of the CEO as there were for the ex-Barclays chief Bob Diamond who’s head rolled shortly after they announced their fine. Perhaps Stephen Hester, who’s been a prominent figure in the press dealing well with all these problems the bank has faced, is seen as a slightly more acceptable face of banking whereas Bob Diamond was considered a pure investment banker with little concern other than his bonus. Either way you look at it the hope is that this is the final chapter in banking scandals, but we’ve heard this said before and can’t discount the possibility of another revelation around the corner.

A rebound in equity markets yesterday took US indices back to the highs that they saw at the end of last week however European indices have been a little more reluctant to recoup the losses incurred on Monday. For those US stocks the uptrend on the short term chart still looks very much intact yet for the Dow the 14,000 level remains a difficult hurdle to overcome. We saw another round of better than expected corporate results yesterday which triggered the rebound in the Dow taking it just shy of that 14,000 level to close up 99 points at 13,979. The rally also came at a time when there was a small miss in terms of the ISM non-manufacturing figure, albeit a small one. At the same time there was big news in terms of Dell, the third biggest computer maker in the world, which has agreed to be taken private.

The rebound in stocks does look to be continuing this morning as the FTSE gains more momentum taking it back above 6300 at the time of writing. It looks like London stocks are keen to match the US indices by getting back towards their highs for the year so for the bulls the resistance seen around 6350 is the next near term hurdle.

Ahead of the European Central Bank interest rate meeting due to take place tomorrow, the shared currency resumed its rally versus the greenback, climbing 65 pips to 1.3577. If investors were wondering whether a higher euro could dampen a European economic recovery (as French President Hollande suggested) it appears the ECB officials are not too worried but rather content with the current level. At the time of writing the single currency is trading at 1.3535 against the greenback.

Gold closed little changed at $1672.7 yesterday as it failed to sustain Tuesday's ascension after stronger than expected earnings led US stocks to rise. Investors are still including gold as part of their portfolios and looking for opportunities where it may break out of its sideways trading, but are also being tempted by equities in a climate of improving key economies.

Service industries across the US, although down from the previous month, were slightly better than estimated spurring optimism in the energy sector. Helped also by a recovery in equities combined with a renewed weakening in the US dollar, the WTI crude prices recouped some of the losses posted a day before, finishing 53 cents up at $96.62 a barrel.

City Index - UK Morning Brief 07 Feb 2013

Google Trend UK - popular searches: Eurasian Natural Resources

Vodafone Group posted an interim management statement for the quarter ended December 31: "Reported Group revenue for the quarter was £11.4B (-2.0% YoY reported, -1.8% organically) and Group service revenue was £10.4B. On an organic basis Group service revenue decreased by -2.6%. Excluding the impact of MTR cuts, Group service revenue decreased by -0.4%. Our emerging market operations continued to grow and we saw an increasing uptake of data services across the Group, but this was offset by macroeconomic, regulatory and competitive pressures across Europe which intensified in the quarter. (...) Our results continue to reflect very difficult market conditions in Europe. We are addressing this through firm actions on cost efficiency, and continuing to invest in areas of growth potential."

Xstrata said its Collahuasi copper mine in Chile, a JV with Anglo American and Mitsui, reported a significant increase to its Mineral Resources and Ore Reserves, pointing out: "The new Measured, Indicated and Inferred Resource has increased by 1.4B tonnes to over 9.0B tonnes at an average grade of 0.81% copper and 0.02% of molybdenum. This represents a 19% increase on the previous estimate published in December 2011. Total contained copper metal has increased by 23% to around 73M tonnes. Ore Reserves have increased by 10% compared to the previous year, up 292M tonnes to a total of 3.2B tonnes at an average grade of 0.81% copper."

Burberry Group announced the appointment of John Smith, formerly Chief Executive of BBC Worldwide, as COO.

Compass Group issued an interim management statement: "Compass has had a good start to the new financial year with first quarter organic revenue growth of nearly 6%. Organic revenue growth in North America was particularly strong with the Ascension Health contract contributing over 1% to global sales in the period. The environment in Europe remains difficult, as expected, but our cost reduction plans are on track. (...) and our expectations for the full year remain positive and unchanged." Separately the Co announced Roy Gardner will resigned as chairman and it will appoint an independent search consultancy to commence a search for his successor.

Smith & Nephew reported 4Q EPS of $0.158 vs $0.157 a year earlier and trading profit down 2.5% (+2% underlying) to $272M on revenue of $1.1B, down 2.6% (+3% underlying). FY EPS rose to $0.813 from $0.653 a year earlier. The Co proposed raising final dividend by 50% to $0.162 per share, giving full-year dividend of $0.261 per share. The Co added: "We expect the market conditions seen in 2012 broadly to continue in 2013."

TUI Travel unveiled 1Q13 results: "Group revenue declined by 4% from the prior year at £2,718M (1Q12: £2,845M). This result was driven by a foreign currency translation impact of -4%. The Group's underlying operating loss increased to £116M (1Q12: loss of £109M). (...) On an underlying basis, excluding the impact from empty leg accounting, underlying operating loss reduced by £16M to £93M. (...) We are confident that our strategy is driving performance and based on current trading we expect to be towards the top end of our roadmap guidance of 7 to 10% underlying operating profit growth for the 2013 financial year."

Financial Services basic resources and auto & parts shares gained most in London on Wednesday.

Basic Resources: Eurasian Natural Resources (+9.12% to 375.6p), Lonmin (+3.02% to 378.9p), Vedanta Resources (+2.04% to 1298p) and Mondi Plc (+0.45% to 773p) closed at a 3-month relative high against the FTSE 100.

Financial Services: IG Group Holdings (+6.6% to 497.3p), 3I Group (+3.73% to 275.5p), Schroders (+2.88% to 1999p), Henderson Group (+2.41% to 161.8p), London Stock Exchange (+2.35% to 1263p), Close Brothers (+1.09% to 1018p) and Jupiter Fund Management (+1.07% to 341.3p) reached a new 3-month relative high against the FTSE 100.

Food & Beverage: Associated British Foods (+0.91% to 1776p) closed at a 3-month relative high against the FTSE 100.

Industrial Goods & Services: Ashtead Group Plc (+2.33% to 479.4p), Weir Group Plc (+2.23% to 2066p), Imi Plc (+1.44% to 1199p), Spectris (+1.23% to 2303p), Howden Joinery Group (+0.57% to 192.9p) and Rotork Plc (+0.25% to 2761p) closed at a 3-month relative high against the FTSE 100.

Media: Daily Mail & General (+5.96% to 640p) and WPP Group (+0.8% to 1009p) reached a new 3-month relative high against the FTSE 100.

Oil & Gas: Premier Oil Plc (+1.3% to 390.1p) closed at a 3-month relative high against the FTSE 100.

Personal & Household Goods: Burberry Group (+2.88% to 1430p) and Reckitt Benckiser (+0.47% to 4269p) closed at a 3-month relative high against the FTSE 100.

Retail: Inchcape (+1.44% to 486.5p) reached a new 3-month relative high against the FTSE 100.

Telecommunications: BT Group (+1.41% to 272.7p) closed at a 3-month relative high against the FTSE 100.

Travel & Leisure: William Hill (+1.55% to 393.5p), Ladbrokes (+1.44% to 218.7p), Easyjet (+1.42% to 962p), Whitbread (+0.91% to 2672p) and Intercontinental Hotels (+0.37% to 1918p) closed at a 3-month relative high against the FTSE 100.

Utilities: Drax Group (+2.05% to 623p) closed at a 3-month relative high against the FTSE 100.

Capital Spreads Daily Market Commentary 07 Feb 2013

Banks in focus today, but not the type you think

Banks will be the focus of play today but not the sort of scandal that struck high street and investment banks that have been dominating the headlines of late, rather the central banks of the UK and eurozone. Although the BOE and ECB are completely separate from other banks being central banks, considering the amount of bad rhetoric towards normal banks it’s somewhat surprising that central banks haven’t come under fire with wider public disdain. After all the BOE for instance has missed its inflation target for so long now that the Governor must have almost run out of ink the amount of times he’s had to write to the Chancellor explaining why he’s overshot his target. Lowering the benchmark interest rates and keeping them so low as the banking sector repairs itself and the flat lining economy attempts to recover, however savers and pensioners have suffered immeasurably as a result. There are also many questions over the BOE’s quantitative easing program which the central bank keeps claiming is doing a good job of propping up the economy, however there’s little that normal people on the street see in the way of material benefit apart from higher prices.

Calls are mounting from many angles for the BOE to easy monetary policy further in order to boost the economy and the incoming Governor, due to be one of the most powerful unelected figures in the country, has been making it clear that he’s not worried about the inflation target, but would rather focus purely on growth. Such a shift would put it in the Federal Reserve’s camp where Ben Bernanke has set a bar of ending monetary stimulus when and only when unemployment hits 6.5%. These measures unfortunately mean that high inflation is likely to remain with us for some time to come. No doubt this will be a subject of much discussion when the incoming Governor Mark Carney makes his testimony in front of MPs today.

Things are a little different across on the continent however where deflationary pressures are a little higher than in the UK. But with the single currency racing higher and LTROs being repaid leading to a normalising yield curve, the pressure on the ECB to cut its base rate is mounting. Any future rate cut however is not expected to come today.

Meanwhile this flow of new money and liquidity is fueling equity market gains and this morning the FTSE 100 is edging higher on the open. Back around the 6300 mark the index seems to have temporarily fallen in love with the level as it remains stuck in a bit of a consolidation phase. The index continues to be better supported than its European counterparts which saw another big drop yesterday so investors seem to be favouring UK stocks over European ones for now.

Amid political rows in Italy and Spain, the euro came under pressure yesterday losing 56 pips against the US dollar to close at 1.3521. Greece’s banking system is again under scrutiny after comments by the Southern European country’s finance minister pointing to its weakness. So, the ECB interest rate meeting kicks off later today with plenty of issues for Mario Draghi & Co.

Gold continues to trade in a narrow range after signs of an improving global economy. The precious metal hit just below a resistance level of $1680 in intra-day trading yesterday and closed at $1676.8, up by $4.1 bucks. Today all eyes are on the outcome of a European Central Bank meeting where Draghi may voice concerns over an overvalued euro. Many think this would lead to a rise in gold if the sentiment is that the economy hasn't bottomed out and measures to weaken the currency are taken.

The US Department of Energy released its weekly crude inventories report showing a build of 2.6 million barrels, roughly in line with the estimates. After an initial drop the WTI crude prices rebounded towards the close, ending just 20 pips higher at $96.78. The energy complex will be closely watching the ECB meeting since Europe appears to be the perceived risk for any economic recovery in the US.

Severn Trent Plc announced the sale of its Severn Trent Analytical Services (also known as Severn Trent Laboratories), which "provides potable, wastewater and contaminated land testing services to UK commercial and utility customers", to Australia-listed ALS Limited. Financial terms were not disclosed.

Catlin Group said FY12 net income surged to $305M from $38M a year earlier with return on tangible assets improving to 14.6% (FY11: 1.7%) and return on equity to 11.3% (FY11: 1.3%). The board declared a final dividend of 20 UK pence per share, making a full-year dividend of 29.5 pence per share, up 5% YoY.

Cable & Wireless posted an interim management statement: "We continue to anticipate that Group EBITDA performance for 2012/13 will be similar to 2011/12, in line with Group outlook given at the start of the year."

Oil & Gas banks and personal & household goods shares fell most in London on Thursday.

Financial Services: 3I Group (+1.2% to 278.8p) and Jupiter Fund Management (+0.21% to 342p) closed at a 3-month relative high against the FTSE 100.

Industrial Goods & Services: DS Smith (+1.22% to 233p), Howden Joinery Group (+0.62% to 194.1p) and Weir Group Plc (+0.58% to 2078p) closed at a 3-month relative high against the FTSE 100.

Insurance: Legal & General (-1.14% to 146.9p) reached a new 3-month relative low against the FTSE 100.

Capital Spreads Daily Market Commentary 08 Feb 2013

Do yesterday's falls present a buying opportunity?

The near term uptrend in the FTSE is being tested and in the case of some of the European indices you could argue that it’s over however this morning there’s yet another attempt by those bulls to pick up stocks that they believe have corrected too far. Yesterday’s sell off was particularly sharp in the FTSE compared to the likes of the Dax and Cac as the London market has yet to succumb to any real selling pressure as yet and was probably overdue a pull back. US markets on the other hand remain near their year’s highs despite the comments by the European Central Bank President Mario Draghi that a strong euro could make a euro area economic recovery harder to achieve which worried US stocks investors a little but not enough to cause mass selling hysteria. This sent the Dow lower by over 100 points initially but it recovered towards the end of the session and ended only 40 points in the red closing at 13,944.

Yesterday’s focus was very much on central banks and here in the UK we had a proper chance to meet our next BOE Governor who is due to take office in July. The FTSE initially got a boost from the comments he made before giving back its gains and sterling strengthened too as he made it clear he was going to make some changes in an attempt to give the BOE a wider remit and focus on not just keeping inflation intact, but boosting employment and growth, similar to the remits that other central banks across the pond undertake. What this signals is a likely increase in the part that central banks will play going forward and no doubt an escalation of the so called “currency war”.

As mentioned the bulls are looking interested again following yesterday’s fall with the FTSE up some 35 points to 6265, indicating that it’ll take a lot more selling than the little bit we’ve seen so far this week to reverse the uptrend that’s formed since the New Year.

The ECB left its benchmark interest rate unchanged at a record low of 0.75% but it was actually President Mario Draghi’s concerns over a strengthening euro that spooked the global markets. Although the jury is still out there to decide whether the common currency is fairly valued against the greenback, the next reaction was one of shoot first and ask questions later. Consequently, the euro was pushed 124 pips down to 1.3398 and so far this morning the euro is not bouncing as much as the FTSE with EUR/USD currently at 1.3405.

Gold closed at $1670.6 yesterday after a weakening euro caused it to slip. This morning it is edging up slightly on track for its second weekly rise and investors are waiting until after the New Year holiday period in China to see if it can break from the range of around $1660-1680 where it has been trading. Pre-holiday buying in China has been a factor in pushing prices up slightly and solid economic data from the world's second largest economy have made equities more attractive there along with equities in other key economies with improving prospects.

Demand for the US dollar was boosted yesterday as investing community grew concerned by the ECB questioning its currency’s recent strength. In turn that easily spilled into the energy complex sending the WTI crude prices 94 cents down to $95.86 a barrel. A slightly bigger than expected figure for the weekly jobless claims also put downside pressure on crude prices.